Wednesday, June 7, 2017

Connecticut Continues Downward Spiral: Aetna To Leave After 150 Years

Aetna-maggedonAdding to Connecticut’s fiscal woes, Hartford is losing one of its signature companies.

Aetna, one of Connecticut’s largest employers, confirmed this week
that it is leaving the state. Though rumors of an exit have swirled
since last year, the news still comes as a shock. It extends a long run
of bad news coming out of the Nutmeg State, including General Electric’s
January 2016 announcement that it will relocate its headquarters from
Fairfield to Boston, mounting population losses,
and enormous fiscal challenges at the state and city level, which, in
Hartford’s case, have prompted open discussion of bankruptcy.

Aetna has been in Hartford for over 150 years. It’s the city’s
fourth-largest taxpayer and a major source of corporate philanthropy.
Many details remain unclear regarding the insurer’s exodus, including
how many of its Connecticut-based 5,800 employees will remain in-state.
But the departure will do nothing to ameliorate the dire fiscal problems
facing Connecticut and its capital city.

With one month left in the current budget season, Hartford has yet to
close the massive deficit it faces for the next fiscal year. In fact,
Mayor Luke Bronin and the city council never truly balanced this year’s
budget: their plan for fiscal 2017 relied on an assumed $15.5 million in
union concessions that have failed to materialize. Hartford’s budget
woes are structural, rooted in excessive debt and an extraordinarily
weak tax base. With limited options, the city recently solicited proposals for the services of municipal-bankruptcy lawyers.

Hartford’s budget is so strained in part because half of its tax base
is tax-exempt. Over decades, the city failed to attract for-profit
corporations, instead increasings its reliance on state government and
nonprofits, such as hospitals and universities. For Hartford, a major
company like Aetna is irreplaceable.

But the news will probably stiffen state officials’ resolve to avoid a
Hartford bankruptcy at all costs. Bronin estimates that he needs $40
million in additional aid from the state to keep the city solvent. Both
Democratic and Republican state officials already sound open to bailing
out Hartford, voicing fears about how Connecticut’s reputation would suffer if its capital city files for bankruptcy.

From a political standpoint, Bronin will likely emerge from this
disaster unscathed: a popular mayor respected by the business community,
he has only been in office since early 2016. The same can’t be said for
Governor Dannel Malloy, who announced earlier this year that he won’t
be running for a third term, due to plummeting approval ratings.
(According to the Morning Consult,
Malloy is the most unpopular Democratic governor in the nation.) The
budget and the economy are Malloy’s weakest issues. The governor admitted
that he failed to secure a direct meeting with Aetna’s CEO, which will
confirm to his critics that he is clueless as to how to stimulate growth
in Connecticut.
For his part, though, Malloy’s pretty sure that he knows what needs
to be done: invest in Connecticut’s cities to make them more exciting.
“We all know that employers—especially large employers—are attracted to
city centers,” said
Malloy. “It’s why my budget proposal this year is so focused on not
just protecting our cities, but in growing them. In making them into
even more dynamic and exciting places to work and to live.”

Let’s keep things in perspective: Connecticut’s urban centers bear
more resemblance to Rust Belt cities like Reading, Pennsylvania or
Springfield, Massachusetts than to Boston, San Francisco, or New York.
It’s the value of Connecticut’s suburbs as talent magnets that is
underappreciated. Connecticut ranks in the top five states in measures
of productivity, educational attainment, and per-capita income....MORE